A method of producing mesenchymal stem cells from induced pluripotent stem cells in which induced pluripotent stem cells are cultured in the presence of a TGF-β inhibitor an in an atmosphere containing from about 7 vol. % to about 8 vol. % CO2 for a period of time from about 20 day to about 35 days. The cells then are transferred to a culture dish having a hydrophilic surface, and the cells are cultured in a medium containing a TGF-β inhibitor for a period of time sufficient to produce mesenchymal stem cells. Such mesenchymal stem cells are more stable and less likely to form tumors, cancers, or teratomas. Also, the induced pluripotent stem cells may be genetically engineered with at least one polynucleotide encoding a therapeutic agent and then are cultured as hereinabove described to provide genetically engineered mesenchymal stem cells that express sustained amounts of a biologically active protein or polypeptide.